Silver – Are We There Yet?

“For an individual to fix Libor is a crime. For a central bank to suppress European bond yields is an act of financial statesmanship. “   -- Jim Grant

ca·pit·u·la·tion

kəˌpiCHəˈlāSH(ə)n/

noun 

1. The action of surrendering or ceasing to resist an opponent or demand. “the victor sees it as a sign of capitulation

Financially speaking…

“When investors give up any previous gains in stock price by selling equities in an effort to get out of the market and into less risky investments. True capitulation involves extremely high volume and sharp declines. It usually is indicated by panic selling.”

Based upon reports of physical retail shortages of silver, there is no “retail” capitulation to speak of…

Paper price may indicate that things couldn’t be worse. And yet that which gives rise to the price — derivatives – suggest that things could not be better.

Paper prices are an illusion. Unfortunately they are illusion that we all must obey when buying and selling the physical asset.

The surge in retail silver premiums may be a slight echo of the underlying potential for the next move up – but a tiny one.

The reality lies just below the surface.

The trade reporting data says it all. Where the managed money collective has piled on short to a lever never before seen.

Indeed paper price is a COMEX – trade position – paper-managed affair.

COMEX is the most important derivative exchange for silver volume by far. It remains the primary price determining mechanism. Tokyo and Shanghai are tiny in comparison. London is a dark, non-standard over-the-market, priced in US dollars, that keys from COMEX while being fully managed by the big banks.

The COMEX silver speculative short or the sized of the managed money category has once again, moved right back to all-time highs joined now by gold for the first time in reporting history.

In silver, that’s 55,000 contracts, or a staggering 275 million ounces. More than one third of the metal produced by the world in one year, against a paltry 178 million “physical ounces”  held in the warehouse system – registered and eligible combined.

This, in a market with 190,000 open contracts or nearly one billion ounces in derivative form.

All while the commercial net short positions in both metals are at extreme cyclical  and multi-year lows.

The big banks – with JPM as the leader – have essentially cleared the runways for higher prices.

For the metals it simply doesn’t get any more bullish than this. And yet, almost no one sees it. In fact, the majority paying attention are celebrating the end of precious metals.

Given JP Morgan’s colossal hoarding of physical silver over the last four years beginning in May of 2011, it ‘feels’ scripted.

As soon as we cross over the next few levels of ever-lower moving averages we will be off to the races. A race that will stop only when and only if they decide to stop it’s advance.

Price suppression remains vexing for even the most diehard investors.

It’s natural to want to find justification for any price.

And yet, there is very little issue and basically no mainstream opposition with regard to interest rates.

This all anyone should need to know.

Where is the visible hand in that scenario?

The LIBOR fix was one thing. How soon we forget that the fix – which determines the cost of money and credit across trillions of dollars – was totally fixed by a small club? And federal funds rates should be so different?

No wonder regulators turn a blind eye so easily when it comes to the silver disconnect.

There are no markets – just interventions.

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